Even though there are more and more rumours that interest rates will go up before the end of the year, first-time buyers are still being told to give a tracker mortgage serious thought.
Even though the Bank of England recently decided to keep interest rates at 4.5 percent, there is more and more talk that they will go up by a quarter point before the start of 2007.
But Moneysupermarket says that people looking for mortgages shouldn't automatically dismiss the idea of a tracker mortgage, where payments depend on the interest rate, because rates have also gone up in the fixed rate mortgage sector.
Even though the bank has frozen the cost of borrowing, the cost of a fixed-rate mortgage has already gone up by an average of 5% since August of 2005. Also, the financial market is affected by things outside of it, so more increases are likely.
Assuming that the interest rate stays around 4.75 percent for the next couple of years, Moneysupermarket says that home buyers would be foolish to always choose a fixed-rate mortgage because they can often find better deals in the tracker market.
Louise Cuming of Moneysupermarket was recently quoted as saying that it's not always as simple as choosing between a fixed mortgage or a tracker mortgage.
People should ask themselves if their monthly expenses are already the most they can afford. She suggested that they get a fixed-rate mortgage if this is the case and if even a small increase in base rates would make this harder to do.
Ms. Cuming went on to say that if they have some financial wiggle room, they would be better off with a tracker mortgage because, in the end, all signs show that rates are not likely to go up much in the next two years.
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